At Walmart, the opening act starts with fresh

Sam Silvestro’s official title at Walmart in Canada is senior director of fresh foods. But his business card may as well read head of first impressions. That’s because Silvestro is in charge of the first two departments shoppers see when they walk into many Walmart stores: produce and bakery.

Silvestro must make sure the impression they get is a good one. More to the point, he wants Canadians to think of Walmart the next time they go out shopping for fresh food.

Fresh isn’t a nice-to-do at Walmart these days. Eight years after the discounter introduced its full-grocery Supercentre format to Canada, fresh is a core part of the business. It’s an area Walmart needs to do well in if it wants to continue driving up grocery revenue, which analysts say is an increasingly important part of Walmart’s business in Canada.

Last year, Walmart’s food sales reached $6.3 billion in Canada, a 20 per cent jump from 2011, according to estimates by CIBC World Markets. Walmart is investing hundreds of millions to keep that double-digit growth going. It’s adding 37 Supercentres this year on top of 73 last year. There appears ample opportunity to plop down new stores. The first Supercentre arrived in Quebec just two years ago, and Atlantic Canada is getting its first only this year.

As it expands, Walmart will look to its fresh departments to do a lot of the heavy lifting. Canadians are used to going to Walmart for cheap chips and mustard, and even inexpensive lettuce. But, now, Silvestro wants them to drop by for organic bananas, local pears and fresh-made pies, too.

An ex-Sobeys executive who’s been with Walmart since September 2004, Silvestro has the kind of relaxed, thoughtful demeanour that people who’ve worked their entire lives in retail tend to possess. He started out, as a teenager, in the produce department of Darrigos, in his hometown of Guelph, Ont., then, after university, ran his own fruit and vegetable shops in Guelph. Silvestro next went to work for Sobeys where he stayed for 16 years before heading to Walmart.

At the Mississauga, Ont., headquarters of Walmart, Silvestro leads a team of six in produce and four in bakery. They are a busy group. Sections of Walmart’s produce departments have been remerchandised and more organic, local and ethnic produce is appearing on shelves. A private-label bakery line has been launched, and Silvestro is insistent that seasonal items lead the shopping experience.

“We want to win on seasonal,” Silvestro says matter-of-factly. On a blustery day in January, that appeared to be the strategy at a Walmart in the tony Toronto suburb of Oakville. Pink cookies and other Valentine’s treats sat on a table display near the front entrance. Silvestro was there to do an interview with Canadian Grocer. After a store tour, he sat down to explain Walmart’s fresh strategy and how it’s using produce and bakery to drive business and serve customers. Here are edited excerpts:

Walmart Canada announced a few years ago it would be “refocusing” on fresh, with more local and organic products. Why did you do that?

We do a lot of customer focus groups and the perception of the produce department wasn’t where we wanted it to be. The whole reason to refocus was to bring customer attention to the fact that we had fresh, quality produce at an unbeatable price. We wanted to bring our customer perception from where it was and make it higher. Have we been successful? Yes, very successful. We measure customer metrics such as price perception, value, quality, variety and freshness. The perception of Walmart has gone up in every one of these metrics.

Walmart’s goal is to buy 30 per cent of produce annually from local sources and 100 per cent when local items are available. So are you dealing directly with farmers more often?

Definitely. When we were just launching in produce in Canada, it was more difficult to work directly with farmers. But as we’ve gotten bigger, our farmer base has grown. Of course, we live in a country where it snows. So in winter we use product in storage until it runs out. Also, we’re developing an incredible vendor base of hothouse growers. That has expanded the time period for local produce, such as tomatoes, cucumbers and peppers. You may not see produce grown in the ground in stores until June and supply may end in September or October. But hothouse can start in March and go to November. We’ve been able to expand the season a good five months. We’re also trying to reduce the amount of handling that a product gets. We want to get product from farm to store with as few touches as possible, preferably from farm to the DC and out the same day. It gives produce more shelf life and the customer can keep it longer at home.

What’s Walmart’s definition of local?

There are two definitions of local: provincial and national.  If an item is grown in the province, we do our utmost to supply from within the province. If the province doesn’t grow it, we ship product from within Canada to that province. So if a western province doesn’t grow apples, and B.C. grows apples, we’ll make sure we have B.C. apples in those western provinces. And if apples are available locally, we’re going to buy them. There’s no miss, no 99.9 per cent. We’re committed to 100 per cent of the time.

Tell me about the remerchandising of your produce wall.

We’re merchandising produce vertically. We’ll do four feet straight up and down of mini-carrots or straight up and down four feet of mushrooms. Why? It draws the customer’s attention and it’s easier for them to choose. For example, with mini-carrots, it’s easy to select a size, whether it’s one pound or two pounds or organic. Vertical also gives us more merchandising options. Take herbs, for instance. We can put together not just fresh herbs but also packaged herbs and jars of herbs, all in one place.

I haven’t seen Walmart tout its local produce selection the way some other chains do in TV ads. Any plans to start?

We have two waves on marketing local. The first wave is the signs that we’re putting next to the produce items in the stores, whether it’s for BC Tree, Foodland Ontario or Aliments du Quebec. We put those logos with the product in our flyers too. We ran a number of flyers this past summer that were strictly Foodland Ontario. You’re going to see our marketing expand as we do more to promote our local offering.

People don’t necessarily think of Walmart for organics. But your stores have a decent selection. What’s the strategy?

We could carry an organic version of everything we sell. But we are still a discounter. So we carry organics that we know our customers are really looking for. We have peas, carrots, apples, packaged salads and potatoes, to name some. We also make sure we have organic bananas right next to the big table of regular bananas. And we keep the price gap as narrow as possible. The price gap between conventional bananas and organic bananas is 10 cents a pound. We’re all about everyday low prices and unbeatable prices, and we do that with organics too.

In your stores, the bakery is now up front. What’s the reason?

We want to give customers the perception of freshness, and there’s no question a bakery puts freshness in the customer’s mind. Bakery is also a very high impulse buy. People usually don’t have mini-tarts or cookies on their grocery list. If you put bakery up front, you have a better chance of a purchase. And we have a great croissant program, a great bagel program, and an excellent artisanal bread program. Another reason bakery is up front is seasonal. We want to win seasonal. We think it’s a big part of Walmart’s business. So when you walked into our store today you told me you noticed the Valentine’s display. And when Valentine’s is over, and you come into our store, rest assured there will be Easter displays. And at Thanksgiving, it’s a big pie time. So we make sure we have all the varieties of pie, with the big sellers, pumpkin and apple, front and centre.

Your produce price signs have changed. Why?

We used to have black signs that had to be manually flipped. It was much easier to print them out of the back and highlight the price in yellow. It gives a strong price perception. Also, on produce tables we used to have to put our price signs down below. But now we hang them at eye level. It’s easier to read and again, when you see those signs around the store it emphasizes our low prices.

Last year you launched a private-label bakery line called Your Fresh Market. Why?

We want to give people a quality bakery product at a value price and we want them to know the only place to get that is at Walmart. It helps with repeat customers. We’re expanding the number of SKUs in this line and we’re developing more private-label seasonal items. Your Fresh Market was a huge seller through the holidays. We created a gingerbread house that became one of the biggest sellers in the entire bakery department.

Two years ago you introduced the Supercentre to Quebec. Did you do anything different in produce and bakery there?

No, nothing major. We treated Quebec the same as we have treated the rest of Canada, by finding out what the consumers were looking for, and then ensuring we had it. We did partner with vendors in Quebec, whether it was produce, meat or bakery. But we do that in every market. When we get out to the East Coast this year, we’ll look for the farmer in Nova Scotia or the baker in New Brunswick.

How does Walmart’s Store of the Community program, which customizes selection based on the ethnicity around each store, play out in produce?

This store we’re in right now is a good example. There is an Asian population in this area so we carry vegetables such as lo Bok. If you go into Brampton, northeast of here, there’s a South Asian population, so you’re going to see our stores carry okra. We have a great group in the Store of the Community program and they meet with the fresh team and give us a breakdown of who is living around our stores. We gear our merchandise to what they tell us. In Montreal, for example, there is a high Middle Eastern population so we gear our selection that way.

The last time we sat down with you, five years ago, you said there was no greater opportunity for Walmart than in produce. Still true?

Yes. The minute you take your foot off the pedal and think there isn’t an opportunity, that’s never a good sign. There’ll be an opportunity in produce for Walmart long after I’m gone. You have to keep your eye on that target. The last thing you want to do is become complacent because then you’re not paying attention to what the customer is looking for. We should have continuous improvement all the time. That’s going to keep us on our game, that’s going to keep our customers coming back.